News / Hapag-Lloyd still making money, but faces challenges unless rates improve

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Hapag-Lloyd managed to stay in the black in the third quarter, but CEO Rolf Habben Jansen warned that unless spot rates recovered quickly, the carrier faced “some challenging quarters in a subdued market environment”.

Indeed, based on its updated guidance for a full-year operating profit of between $2.4bn and $3.4bn, the German carrier could be trading in the red this quarter, based on the ebit achieved by the end of September, of $3bn.

Hapag-Lloyd transported 3.1m teu in Q3, which was 4.5% more than the year before, but revenue slumped 55%, compared with the same period of last year, to $4.47bn, for an average rate of $1,312 per teu.

Nevertheless, the carrier’s average rate in the quarter was higher than its The Alliance partner, ONE, which recorded $1,150 per teu for the period, and Maersk, which saw its average rate fall to $1,047 per teu, resulting in the Danish group’s liner sector sliding to an operating loss of $27m.

On the bottom line, Hapag-Lloyd posted a group net profit of $293m for Q3, compared with $5.1bn in Q3 22, for a cumulative profit of $3.2bn at 9M, versus $13.8bn previously.

The company has now segmented its business into liner and terminals, reflecting its growth in the terminal sector, fuelled by a number of acquisitions and joint-ventures.

As at the end of the nine month period, terminals produced an operating profit of $29.4m from a turnover of $92.1m.

On the subject of 2024 contract rate negotiations for the Asia-Europe tradelane, Mr Habben Jansen said it was “a little early” to give an update, but admitted there was considerable downward pressure on contract rates.

He explained: “We see expectations out there for contract rates that are unrealistic and. at those levels, we will not close because we are not going to close contract rates where we, for sure, lose a lot of money.

“We would much rather take out the cost and capacity. Expectations are still in a very wide range, but I would expect those contracts that are closed that expire at the beginning of the year will be above the spot levels we see today,” he added.

In fact Hapag-Lloyd, along with its partners in THEA, has recently suspended an Asia-North Europe loop and two transpacific loops, due to weak demand prospects, in preference to continually blanking sailings.

Mr Habben Jansen explained that voiding or suspending sailings produced a saving of some 65% in vessel operating costs, but still left a carrier 35% to pay out of zero earnings.

Asked in the earnings call Q&A session this morning if freight rates would eventually settle at 2019 levels, Mr Habben Jansen said: “I certainly don’t hope so. As we have said many times before, costs are 25% to 30% above what we had in 2019, so if we ended up at 2019 rate levels you will have an extremely bad result in 2024.”

But he did provide some comfort for Hapag-Lloyd’s circa-16,000 global employees, saying “we do not anticipate making significant adjustments to the number of staff we employ”.